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Stock Markets Are Right to Downplay the Trump-Powell Drama. Here’s Why.

Jul 17, 2025 06:46:00 -0400 | #Markets #The Barron's Daily

(OLIVIER DOULIERY/AFP via Getty Images)

It might seem like a lifetime ago, but there was a point in the mid-2000s when Donald Trump was best known for pointing his finger and saying “You’re fired.”

The president stopped short of using his catchphrase on Jerome Powell Wednesday, but investors still got a sense of what would happen if he did dismiss the Federal Reserve chair.

Stocks and the dollar dropped after a White House official told Barron’s and others that Trump was likely to fire Powell soon, then rebounded when the president backtracked on the idea. Blue-chip indexes ended the day higher, although the dollar wasn’t able to pare back all of its losses.

It is not hard to see why the market wants Powell to keep his job. The White House meddling with monetary policy would raise worrying questions about Fed independence. And apart from that the president’s push for sharp interest-rate cuts would also likely stop the central bank from bringing inflation down to 2%, at a time when tariffs are already forcing consumers to cope with price pressures.

But investors’ best strategy here is to keep faith in the TACO trade —the idea that “Trump Always Chickens Out” in key negotiations. Polymarket users think there’s an 80% chance Powell remains in place at the end of this year, according to a market run by the event-based trading platform.

That’s because Trump tends to care more about the market and big business than he lets on. Wednesday’s brief selloff would have stung him, and big bank CEOs including JPMorgan Chase’s Jamie Dimon and Goldman Sachs’ David Solomon have also come out fighting for Fed independence as the second-quarter earnings season kicks off.

So while the Trump-Powell drama may be starting to feel like a particularly fractious episode of The Apprentice, it’s probably a safe bet that the Fed chair won’t be dispatched from the “boardroom” anytime soon.

— George Glover

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Trump Won’t Fire Powell, Or Will He?

President Donald Trump escalated the drama about whether he would keep Federal Reserve Chair Jerome Powell in that role until his term expires or replace him early. The idea of firing Powell was first floated and then publicly knocked down by Trump. It renewed uncertainty about U.S. monetary policy.

What’s Next: Despite Trump’s walk-back, some believe the damage may be done. “This was a preview of coming attractions,” said RSM chief economist Joe Brusuelas. Markets now know that firing Powell is a live possibility, and that introduces instability.

— Nicole Goodkind and Anita Hamilton

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Crypto Bills Advance to Debate After Marathon House Vote

Three cryptocurrency bills in the House finally passed a procedural hurdle after a marathon nine hour vote late Wednesday in the second attempt to move them to debate. President Trump earlier declared this “Crypto Week,” and expressed optimism for the bills’ passage.

What’s Next: House Speaker Mike Johnson was still hoping to get the bills passed this week. House leadership struck a deal to add a crypto provision to the National Defense Authorization Act, a must-pass bill.

— Janet H. Cho, Liz Moyer, and Elsa Ohlen

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United Airlines Says Conditions Are Looking Less Uncertain

United Airlines’ second-quarter profit beat Wall Street’s expectations, as demand accelerated in July, and business demand accelerated by double digits. The carrier said conditions are “less uncertain” than they were in April, allowing it to update full-year guidance.

What’s Next: American Airlines, Southwest Airlines, and Alaska Air Group, parent of Alaska Airlines and Hawaiian Airlines, all report their second-quarter earnings on July 24.

— Janet H. Cho and Callum Keown

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Stocks Are Pricier Than During the Dot-Com Era. Is It a Bubble?

A quarter-century after the dot-com bubble, one question for investors is how much of that past is prelude. The tech-heavy Nasdaq Composite has consistently beaten the S&P 500 in 2025 and hit its ninth record of the year on Wednesday. But tech investors have been burned in the past.

What’s Next: Société Generale Head of US Equity Strategy Manish Kabra figures the current U.S. equity risk premium—the return stock investors want—is 3.3%, below the 4.2% average. That means the S&P 500 wouldn’t hit bubble territory until around 7,500, more than 20% higher than today.

— Teresa Rivas

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Celebrity-Endorsed Labubu Dolls Send Pop Mart Booming

Stock in Pop Mart, a Hong Kong-listed retailer that’s growing at breakneck speed worldwide, has soared 570% over the past 12 months on the popularity of the Labubu monster plush dolls and figurines.

What’s Next: Pop Mart shares are down 8% over the past month on concerns that the craze may be reaching a peak and that U.S. tariffs on Chinese imports will crimp sales. But analysts say both the company and the stock have room to run.

— Sabrina Escobar

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From time to time, investors like to look for fresh insights outside the world of markets.

In the latest piece for his “Owenomics” newsletter, Acadian Asset Management’s Owen Lamont did just that with the Labubu craze, which has created legions of fans around the world.

At first blush, it might not seem like investors have much to learn from the treasure-seeking thrill that collecting these tiny, troll-like dolls appears to have inspired among people around the world. But Lamont managed to hit on a few interesting parallels.

For more on this, read here.

— Joseph Adinolfi

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—Newsletter edited by Liz Moyer, Rupert Steiner, Patrick O’Donnell